Founded in 1920, Snap-on Inc. (SNA, Financial) is a $3.3 billion, S&P 500 company, headquartered in Kenosha, Wisconsin. It is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. Products and services include hand and power tools, tool storage, diagnostics software, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers as well as for customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education.
Geographically, it stretches over the United States, the United Kingdom, Canada, Germany, Australia, Japan, France, Sweden, Spain, the Russian Federation, Brazil, China, Italy, the Netherlands, Argentina, Indonesia, Denmark, Norway, Mexico and India.
In over 130 countries, it markets its products and brands, It has the following business segments- Commercial & Industrial Group, the Snap-on Tools Group, the Repair Systems & Information Group, and Financial Services.
First Quarter Results
Sales
Sales increased by 5.1% ($40.3 million) from 2014 first quarter and were $827.8 million (excluding $38.5 million of unfavorable foreign currency translation and $4.9 million of acquisition-related sales).
Organic sales increased by 9.9%.
Operating Earnings
Operating earnings before financial services stood at $137.9 million (an improvement of 120bps). It was 16.7% of sales (in comparison to 121.7 million, or 15.5% of sales, last year).
Financial services operating earnings increased by 17.2% ($5.9 million) and were $40.3 million.
Financial services revenues increased by 14.3% ($57.4 million) from the prior year period.
Consolidated operating earnings also showed improvement and were $178.2 million (which was 20.1% of revenues) in comparison to $156.1 million, or 18.6% of revenues, last year.
Income Tax Rate
The effective income tax rate during the first quarter of this year was 32.0% (which was 31.6% in 2014).
Net Earnings
Net earnings were $110.5 million, or $1.87 per diluted share, compared to net earnings of $95.9 million, or $1.62 per diluted share, in the prior year period.
Quarterly Dividend
The company declared quarterly common stock dividend of $0.53 per share, payable June 10, 2015 to shareholders of record on May 20, 2015. Snap-on has paid consecutive quarterly cash dividends, without interruption or reduction, since 1939.
Segment Wise Results:
Commercial & Industrial Group
Sales: Sales in the quarter increased by 2.4% ($6.9 million) from 2014 levels and were $297.5 million.
Operating Earnings: Operating earnings of $44.0 million in the period, including $1.3 million of unfavorable foreign currency effects, increased $4.9 million from 2014 levels, and the operating margin (operating earnings as a percentage of segment sales) of 14.8% improved 130 basis points from 13.5% a year ago.
Snap-on Tools Group
Sales: Sales increased by 10.1%, from 2014 ($34.6 million) and were $378.2 million in the quarter.
Operating Earnings: Operating earnings of $59.8 million in the period, including $3.0 million of unfavorable foreign currency effects, increased $10.6 million from 2014 levels, and the operating margin of 15.8% improved 150 basis points from 14.3% a year ago.
Repair Systems & Information Group
Sales: Sales during the quarter increased by 3.7% from 2014 levels (or, $9.6 million) and were $272.3 million in the quarter.
Operating Earnings: Operating earnings of $63.9 million in the period, including $2.1 million of unfavorable foreign currency effects, increased $5.8 million from 2014 levels, and the operating margin of 23.5% improved 140 basis points from 22.1% a year ago.
Financial Services
Operating Earnings: Operating earnings were $40.3 million on revenue of $57.4 million in the quarter (which was $34.4 million on revenue of $50.2 million a year ago).
Corporate expenses: These expenses came to $29.8 million in this quarter (an increase of $5.1 million from $24.7 million last year), primarily reflecting increased performance-based and stock-based compensation expenses, as well as planned higher pension expense.
Outlook
1. SNA expects capex to be around $80 million-$90 million.
2. It expects that its full year 2015 effective income tax rate will be at or below its 2014 full year rate.
On a Concluding Note
It acquired Challenger Lifts, Inc. (“Challenger”) for approximately $38 million in cash. Challenger, with 2012 sales of approximately $45 million, designs, manufactures and distributes a comprehensive line of vehicle lifts and accessories to a diverse customer base in the automotive repair sector. This acquisition is expected to lift product line complements and increases Snap-on’s existing undercar equipment offering, broadening our established capabilities in serving vehicle repair facilities. It will fasten the momentum of the company to grow in the near future.
Snap-on expects to make continued progress along its defined runways for coherent growth, including enhancing the franchise network, expanding in the vehicle repair garage, extending to critical industries and building in emerging markets. SNA beat earnings estimate in the first quarter. It is exhibiting bullish behavior and according to me is a buy. Investors may take a look at this company. Given the current scenario, it is a buy. It is expected to create shareholder returns.
(Source: Company’s Website)
